Why FedEx Express Is Covered by the Railway Labor Act: An "Historical Anomaly"

When FedEx Corporation (“FedEx”), the parent company of FedEx Express, began operations in 1971, it was essentially an air carrier, with ground transportation as only a minor appendage. Thus, in a 1978 opinion, the NMB described FedEx as follows:

The Federal Express Corporation is an air freight carrier principally engaged in operating an interstate air express service.²⁴

Consistent with this description, FedEx was from the outset subject to airline regulations, including the RLA. For labor relations purposes, this meant that the company’s employees – including its relatively small contingent of ground transportation employees – were covered by the RLA rather than the NLRA.

Over the years, the ground transportation workforce of FedEx Express has grown to almost 100,000 truck drivers, package handlers, dispatchers, and other employees.²⁵ Notwithstanding this change in the composition of its workforce, FedEx Express’ ground transportation employees have – because of administrative agency decisions and Congressional action discussed below – remained under the coverage of the RLA. Meanwhile, the ground transportation component of UPS and other package-delivery companies with integrated air and ground transportation have been covered by the NLRA.

This difference in statutory coverage persists notwithstanding the fact that FedEx Express and these other package-delivery companies are now structured and operate similarly. By way of comparison, UPS, which originated as a ground shipping service, now provides overnight air deliveries. FedEx Express, founded as an airline, now delivers packages by truck. The two companies’ air and ground fleets are of comparable size: FedEx Express utilizes about 650 airplanes, while the UPS air fleet numbers about 550; FedEx Express has about 45,000 package-delivery trucks, while UPS has about 60,000.²⁶

From the employees’ vantage point, there is no difference between being a truck driver or package handler for FedEx Express or UPS. Yet, FedEx Express’ ground transportation employees face much more formidable obstacles to union representation than counterpart employees at UPS, most of whom are unionized. The difference in their rights and representation helps to explain why UPS’ ground transportation employees, on average, earn $5 more an hour than similar FedEx Express’ employees, and, when employer health care coverage and pension contributions are considered, make at least $8 an hour more.²⁷

This reliance on the difference in the origins of FedEx Express and UPS – rather than on the similarity of their current structure and operation – in determining the applicable labor law has prompted one of the nation’s pre-eminent labor law experts to characterize FedEx Express’ RLA coverage as an “historical anomaly,” noting that “[f]rom the workers’ point of view, it seems unfair.”²⁸

Not only is this difference in statutory coverage unfair to the employees involved, but it also gives FedEx Express an unwarranted competitive edge in the package-delivery industry. Because it has been shown that union representation can substantially improve the wages, benefits, and working conditions of employees,²⁹ the fact that it is more difficult for FedEx Express’ ground transportation employees to unionize under the RLA than it would be under the NLRA is a cost-saving measure for FedEx Express. As one commentator has put it, the ability of FedEx Express to avoid unionization of its employees is “a key element of Federal Express’ market strategy.”³⁰ Market competition among firms within the same industry that provide the same service should not be skewed by differential costs imposed by different labor relations regimes.